Section 1557 – A Tortured Past

Section 1557 is the anti-discrimination part of the Affordable Care Act. It prohibits discrimination on the basis of race, color, national origin, sex, age or disability. Since its enactment this provision has been challenged and rechallenged. Regulations have been issued, repealed and reissued. Most recently in May 2024, see Final Rule.Shortly thereafter, lawsuits were brought challenging the final rules. So, what does this mean for employer sponsored group health plans? Generally, Section 1557 applies to a covered entity. A covered entity is an entity that receives Federal financial assistance, which includes Medicare Parts C and D payments, as well as state Medicaid agencies. By and large, employer health plans are not directly subject to Section 1557 unless the plan receives federal funding, such as through the retiree drug subsidy. Nevertheless, because insurers and TPAs are subject to the rules, employers and health plans will want to ensure that their plan provisions are not discriminatory. If an insurer or TPA recommends a plan provision in compliance with Section 1557, and the employer wants to modify that provision, it should only do so with the advice of legal counsel. Importantly, employers employing 15 or more employees are subject to Title VII, which prohibits discrimination on the basis of race, color, religion, sex (including pregnancy, sexual orientation and gender identity), or national origin. In 2020, a Supreme Court decision, Bostock v. Clayton Cty., Ga., determined that sex is inextricably connected with gender identity and sexual orientation, defining Title VII definition of sex broadly to include all matters related to sex. Because most employers are subject to Title VII, even in the absence of direct regulation by Section 1557, employers will want to ensure compliance with Section 1557.

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